Sun, Sep 16, 2007 - Page 10 News List

Crude drops below US$80 after striking fresh record

DOWNSIDE With more hurricanes likely to hit the US this month, traders said that prices would remain under pressure as the northern hemisphere winter approaches

AFP , NEW YORK

New York oil prices fell on Friday on profit-taking after striking a fresh record peak above US$80 a barrel, with supply fears still strong, analysts said.

New York's main futures contract, light sweet crude for delivery next month dropped US$0.99 to close at US$79.10 per barrel after moving briefly to a new high at US$80.36. On Thursday it reached a record high of US$80.20.

In London on Friday, the price of Brent North Sea crude oil for November delivery fell US$0.90 to settle at US$76.22 per barrel. The contract for next month expired Thursday at US$77.40.

The declines came as the impact faded from Humberto, which hit the Texas coast last week at hurricane strength and then weakened, but still caused significant damage to the oil-producing area.

"The threat from Hurricane Humberto has subsided, taking some of the marginal steam off the recent rally," MF Global analyst Mike Fitzpatrick said.

"Some refiners have already stared to come back online after being shut yesterday due to power outages and this is also why the market is surrendering some gains," he said.

OPEC chief Abdalla Salem El-Badri said on Friday that US$80 oil did not reflect the demand and supply situation and was unlikely to last long.

"I don't think US$80 [per barrel] will last," El-Badri told the media in Vienna. "The fundamentals do not support the price."

Victor Shum, a Singapore-based analyst with energy consultancy Purvin and Gertz, said prices would remain under pressure in the near-term because this month was the peak hurricane month in the US, the world's biggest energy consumer.

Winter in the northern hemisphere is also nearing, which means demand for heating fuel would peak.

"In the near term, there are limited downside risks to the oil market," Shum said.

Oil prices began their record-breaking surge on Wednesday after news that US crude reserves dived lower last week, compounding concerns over tight global energy supplies despite OPEC's move to hike output.

US crude inventories had fallen by a sharper-than-expected 7.1 million barrels in the week to Sept. 7, the US Department of Energy said on Wednesday.

The drop was almost three times heavier than analysts' consensus forecasts.

A decision on Tuesday by OPEC to pump an extra 500,000 barrels of oil per day from November would provide little relief to the tight market, analysts have said.

Phil Flynn at Alaron Trading said the high price in recent days reflected the return of speculators to the market, but also confidence that the global economy will avert a major downturn.

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